This article by Daniel Wolfe in American Banker is a good starting point for identifying why the aristocracy in America with high average daily balances in their bank accounts can’t understand why low and moderate income individuals prefer prepaid cards over a bank account.
To people with checking accounts, prepaid cards will never make sense.
We’re not used to seeing fees displayed so prominently and charged so frequently. We deliberately keep, when we can, the minimum balances that entitle us to waivers on most fees, and if we feel we’ve been charged improperly, we try to get the fees reversed.
Because we are so used to handling our money this way, fee-laden prepaid cards look like a bad deal. Having such visible fees, even if they’re low, is an alien idea. It’s like wearing your underwear on the outside. It just isn’t done.
The article then succinctly states the problem:
The conflict here may not be one of social media impropriety, nor of a respected authority abusing her influence, but of a psychological and experiential disconnect between those who have traditional, full-service bank accounts and those who don’t. Hard-core bank customers may never understand how, to the unbanked and the underbanked, prepaid cards can look great-even honest.
No story illustrates this better than a 2009 National Public Radio piece about a man named Al Walker who used an expensive check-cashing store even though he had a bank account. The reporter showed Walker, fee by fee, how he would save $5 per check just by depositing his checks in the bank account he already had-but Walker refused to use the bank.
‘I don’t have to worry about an overdraft fee here’ at the check-cashing store, he told NPR. ‘I don’t have to worry about overdraft protection. I don’t have to worry about whether this is free. I know what I’m paying; it’s the same every time I come here-and maybe that’s something banks should look into.’
The aristocracy is incapable of experiencing a daily balance that is almost insufficient to cover food and shelter for the night. For the aristocracy, three days to cash a check is nothing. To someone that received their handwritten paycheck at 7PM and need that converted to cash for dinner tonight, most financial institutions are simply not an optio
Low and moderate income individuals and families need liquidity, convenience and low-cost – in that specific order.
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